OPINION: Pioneering firms likely to reap big rewards in Africa

By Neale Hill Time of article published Jul 4, 2019

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Africa has long been regarded as the “next frontier”, representing a largely untapped opportunity for growth in both manufacturing and sales.

As a continent with relatively low levels of industrialisation, and in the context of established markets across the Americas, Europe and Asia having exploited much of their potential appetite and capacity for growth, Africa does indeed present a strong case for attracting future investment and expansion.

Africa’s new dawn was predicted several years ago, and seemed to be gaining traction with new initiatives and partnerships setting the tone with manufacturers testing the waters - particularly in West and East Africa.

However, the global financial crunch, in conjunction with rapidly rising energy prices, saw the expected flood of activity evaporate as budgets became heavily constrained and large corporates directed finances and resources internally in an effort to revive and reinvent existing business models in a fast-changing, technology-driven global climate.

Yet the fundamentals for Africa remain unchanged, as it is extremely underdeveloped and presents a region that is full of opportunity for those that are bold enough to take the leap with a medium- to long-term strategic plan in mind.

Africa is ripe with opportunity for accelerated industrialisation. The region offers the potential for high returns on investment due to its perceived high risk, and the current low competition environment.

And profitability in manufacturing is generally even higher here compared to other sectors.

Currently, only 1percent of global manufacturing happens on the continent.

But thanks to rapid urbanisation and rising consumer demand from a growing middle class, combined with increased political stability and above-average gross domestic product growth rates, global investor enthusiasm has steadily been gaining traction once again.

Crucially, though, any plan for greater participation in global manufacturing has to create a solid foundation of empowerment and upliftment for the people of Africa if it is to succeed.

Extreme poverty, high levels of unemployment and poor education are the greatest inhibitors to future prosperity across the continent.

Accordingly, without raising living standards and, in turn, improving the buying power of African consumers, any prospects of building a sustainable and competitive African economy that attracts international investment will be thwarted.

Admittedly, the dictum “Africa is not for sissies” is probably most apt when it comes to describing the challenges of doing business on the continent.

Political and economic instability, fluctuations in global commodity prices, forex and skills shortages, inadequate infrastructure, trade barriers, and cross-border transport delays are all areas of concern for businesses and investors when deciding on the viability of establishing and attempting to grow a presence in the region.

According to PwC’s 22nd Annual Global CEO survey, policy uncertainty has replaced social instability in Africa as the number one “extreme concern” cited by chief executives for keeping them up at night, followed by availability of key skills, and over-regulation.

Investment in skills development and training can be easily addressed with public-private partnerships that will empower people and set them on the road to success as they gain new knowledge and experience to build the manufacturing sector, and the broader economy.

But it is the complicated and often fractious regulatory framework that presents one of the biggest stumbling blocks to Africa’s upward trajectory.

The government and industry bodies need to adopt a co-ordinated and complementary region-based approach towards simplifying and reducing the barriers to entry, easing the challenges of transport and logistics, and improving access to capital and finance.

An inclusive and co-operative strategy to build strategic relationships with domestic partners will further incentivise investment, bolster local businesses that have the requisite home-grown expertise, and create much-needed employment.

With political will and co-operation, regional integration, outside investment and a genuine, long-term commitment to the development of the continent as a whole, there is no reason why many of these challenges and concerns can’t be mitigated, if not eliminated.

To keep the momentum going, we need to be brave. We need to be willing to take risks, even if there’s the potential for making mistakes in charting these new waters. Mistakes do not equal failure.

Henry Ford once said: “The only real mistake is the one from which we learn nothing.”

In 2018 we made the move to a “super distributor” approach in Sub-Saharan Africa (SSA). Prior to that we had 23 distributors in 23 markets, and we operated each distributor as a stand-alone market.

Attempting to manage such a high level of complexity while maintaining relationships and adequately servicing all of these markets simply didn’t work.

We conceded that we lacked sufficient understanding of local market peculiarities to be able to navigate the unique business landscapes.

We’ve now split our SSA business into three core clusters, and partnered with a lead distributor in each cluster. They are responsible for managing a cluster of existing and new sub-distributors, and all elements in that territory, including logistics, people and capital.

The main advantage of working with well-established “super distributors” is that they have vast local experience, intelligence and infrastructure within these unique and complex regions to support our business.

None of the lead distributors we’ve chosen to work with are automotive sector dependent.

They’re not even beholden to one particular industry. The diversity of their portfolios allows them to manage the ebbs and flows of the economy, and that’s what makes them so resilient and successful.

Because of their scale and reputation in the region, they are also able to attract and retain the best talent. It may even create the opportunity for expansion into new markets for us through their foresight and direct investments.

Africa will, at some point, hit the emerging curve. And those pioneering companies willing to take the necessary risks, to aggressively expand across the continent and build strong distributor networks now, stand to reap the greatest rewards down the line.

Because when the growth does happen, they’ll be perfectly positioned with the right partners and the infrastructure needed to support their business going forward.

Neale Hill is the managing director of Ford Motor Company Sub-Saharan Africa Region. A car industry veteran with 28 years of experience at the Blue Oval under his belt, Hill draws on his wide exposure to international markets in five countries on three continents, to help steer the car giant’s business in SSA forward. He also serves on the boards of Ford Motor Company of Southern Africa, and Ford Financial Services South Africa.


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